Global opposition to unconventional gas mining is growing fast. Impacts on water, food, health and the environment, associated seismic risks and climate change contribution are just some of the many reasons.
Meanwhile, the industry is growing. Its potential growth in Australia is enormous, with large known reserves and billions to be made.
Unconventional gas is set to boom in Australia, but the public has been provided with next to no information — what it is, where it is and the plans for its development — from industry or governments. The industry says the risks of unconventional gas are worth it because it will bring more jobs and economic growth — but the claim does not stand scrutiny.
What is unconventional gas?
Natural gas is mainly methane. It can come from conventional and unconventional sources. Today, most of the world’s growth in gas supply is in unconventional gas.
Unconventional gas is found in rocks of low permeability, which means the gas does not flow freely in the rock or out through a gas well. This makes it more difficult to extract.
By comparison, conventional gas is found in linked porous reservoirs that are highly permeable. This allows the gas to flow freely in the rock or out through a gas well, making it easy to extract.
In economic terms, the main difference between unconventional and conventional gas is the method, ease and costs of getting it out. Unconventional sources require different technology and more investment than the conventional industry to harvest the gas.
The development of new technologies — in particular, a combination of horizontal drilling and hydraulic fracturing (fracking) — have made unconventional gas commercially viable.
In Australia, unconventional gas reserves include shale, tight and coal seam gas (CSG).
And these deposits are large and widespread. This, coupled with new technologies that have made extraction commercially viable, means a big push to develop the unconventional gas industry has begun.
Where are the known reserves?
In Australia, production of unconventional gas began in 1996 with CSG in Queensland’s Bowen Basin. Since then CSG production has grown rapidly, particularly since 2000, making it the most developed unconventional gas resource in Australia.
Eastern Australia has large CSG reserves — the CSIRO estimates about 250 trillion cubic feet, or enough to power a city of 1 million people for 5000 years. These are held in the Bowen and Surat basins in Queensland, and in the Gunnedah, Clarence-Moreton, Sydney and Gloucester basins in New South Wales.
Further reserves across Australia are also being investigated and exploration for CSG has been approved in Western Australia, Victoria, South Australia, Tasmania and the Northern Territory.
As more CSG exploration goes ahead, the amount of known reserves will rise. A 2011 draft report from the Australian Energy Market Operator said known CSG reserves rose by about 900% in five years following exploration in New South Wales and Queensland.
This also applies to shale and tight gas reserves — exploration of which is still largely in its infancy. An August 2011 Norton Rose Report outlined current shale gas development in Australia. It said: “There have been very few exploration wells drilled, no appraisal programs conducted, and no commercial production.” However, shale and tight gas reserves, which usually require fracking, are increasingly being targeted.
A 2011 report commissioned by the US Energy Information Agency estimates Australia has 396 trillion cubic feet of shale gas that can be recovered using current exploration and production technology.
Western Australia has the world’s fifth largest shale gas reserves at 288 trillion cubic feet across five basins. This is about twice the gas held in Western Australia’s offshore areas.
A June 2011 Wilderness Society Briefing Paper reported that exploration had started in all five basins, including fracking in the Canning and Perth Basins. Production has begun in the Perth Basin.
Shale exploration projects are also proposed over 118,814 square kilometres around Arnhem Land in the Northern Territory. A March 2011 ASX announcement by Armour Energy claims the area is “prospective for large shale gas resources which are expected to be comparable to or rival shale gas resources contained within known shale gas basins in the USA”.
Shale gas reserves have also been identified in Queensland and in the Cooper, Otway and Arckaringa Basins in South Australia. Exploration is also approved in Victoria’s far south-west.
The economics of unconventional gas
The mining sector, and the unconventional gas industry in particular, say the mining boom brings jobs, taxes and increased exports. However, a 2011 report by the Australia Institute said: “While one might assume that any expansion in the mining industry simply adds to the overall size of the Australian economy … much of the growth in mining comes at the direct expense of expansion in other parts of the economy.”
The report said the mining boom’s impact on the exchange rate has damaged other parts of the economy: “While mining exports have increased by around 5% of GDP over the period since the beginning of the mining boom, non-mining exports have declined by around 5% of GDP over the same period.”
The high Australian dollar means exports from non-mining sectors — particularly tourism, manufacturing, education and agriculture — are suffering.
This has enormous implications for employment in Australia. The Australian Bureau of Statistics says mining employs just 1.9% of the Australian workforce and that the oil and gas industries combined employ just 12,000 people, or 0.1% of Australian workers.
As mining displaces other sectors of the economy, it also displaces jobs. Because it is far less labour-intensive than manufacturing, tourism and education, it is likely to displace far more jobs than it creates.
Frank Gelber, director of economic consultants BIS Shrapnel, told The Age on March 27 that the mining boom is destroying other sectors of the economy: “We’re burning our bridges. We are losing the skills, the equipment and the markets. When the Australian dollar collapses, we won’t have the industries any more. We will have to go through a total reversal of the process of structural change we are seeing now. We will see a big drop in our standard of living.”
He also predicts that the boom will be over within 15 years, because mining investment in infrastructure — which rose from 1% of GDP to 4.4% last year — and not mining itself, is driving economic growth.
A report commissioned by CSG company Santos on the economic impacts of developing its proposed CSG operations in northwest NSW said the project will create 200 direct jobs.
However, an examination of the report by The Australia Institute found “gas exports from the development will ‘crowd out’ $646 million in other exports by driving the value of the Australian dollar higher”. It said the loss of these exports from other sectors “is likely to cause the loss of 5770 jobs in the non-mining industries”.
The unconventional gas industry may bring some new jobs and investment, but it will displace more jobs than it creates and stifle investment across other sectors; sectors that will remain decimated when the boom turns to bust.